ECO Ch. 31

If a country's economic data shows that private savings equal $300 million, government spending equals $400 million, taxes equal $300 million, and the trade surplus equals $100 million, then what does the investment equal?

$100 million

If a country's economic data shows that private savings equal $350 million, government spending equals $375 million, taxes equal $300 million, and the trade surplus equals $125 million, then what does investment equal?

$150 million

If a country's economic date shows private savings of $300 million, government spending of $350 million, tax revenue of $400 million, and a trade surplus of $75 million, then what does investment equal?

$275 million

If a country' economic data shows private savings of $400 million, government spending of $250 million, tax revenue of $400 million, and a trade surplus of $175 million, then what does investment equal?

$375 million

If a country's economic data shows that private savings equal $250 million, government spending equals $400 million, taxes equal $350 million, and the trade surplus equals $150 million, then what does investment equal?

$50 million

If a country's economic date shows private savings of $500 million, government spending of $300 million, tax revenue of $400 million, and a trade surplus of $100 million, then what does investment equal?

$500 million

Because of the difference between the discipline imposed by market competition and the discipline imposed by political decisions, which of the following is most likely?

difficulty managing public investment so it's done in a cost effective way

If the government initiates an expansionary monetary policy at the same time that its budget deficit increases, then the interest rate will __________________.

either increase or decrease

A country's economic date indicates that there has been a substantial reduction in the financial capital available to private sector firms. Which of the following most likely had the greatest influence on this economy?

especially large and sustained government borrowing

Which of the following is not a consequence of an increase in the government's budget deficit?

exports increase while imports and all other variables are held constant

A reduction in government borrowing can:

give private investment an opportunity to expand.

From a macroeconomic point of view, which of the following is a source of demand for finacial capital?

government borrowing

A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment.

higher interest rate

If the government's budget deficit increases while the economy is producing substantially less then potential GDP and expansionary monetary policy is implemented, then any ________________ from government borrowing would be _____________________________ from that monetary policy.

higher interest rates; largely offset by the lower interest rates

A government will likely ____________________________ to encourage investment in technology R&D by private firms?

implement fiscal policy establishing tax incentives

A decrease in the government's budget surplus will cause the interest rate to:

increase.

Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits?

increasing exchange rates

In a market-oriented economy, private firms will undertake most of the _____________________________, and ________________ should seek to avoid a long series of large budget deficits that might crowd out such investment.

investment in physical capital; fiscal policy

When government policy moves from a budget surplus to a budget deficit and the trade deficit remains constant:

investment will decrease if savings also remains constant.

When government policy moves from a budget deficit to a budget surplus and the trade deficit remains constant:

investment will increase if savings remain constant.

A prolonged period of budget deficits may lead to _________

lower economic growth

A moderate increase in a budget deficit that leads to a _____________________ is not necessarily a cause for concern.

moderate increase in a trade deficit and a moderate appreciation of the exchange rate

In the U.S. economy, the offsetting effects of private saving compared to government borrowing are typically noted as being represented by which of the following ratios?

much less than one-to-one

A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause:

the exchange rate and the trade deficit to increase.

In the national savings and investment identity framework, an inflow of savings from abroad is, by definition, equal to

the trade deficit

A _______ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy?

trade surplus

If an economy has a budget surplus of 400, private savings of 1,200, and investment of 1,600, what will the balance of trade in this economy equal?

0

A government deficit has decreased from 100 to 60. The country's trade deficit is 120 and private savings equal 80 and investment equals 100. If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal:

40.

A government deficit has increased from 30 to 50. The country's trade deficit is 100 and private savings equal 65 and investment equal 90. If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal:

85.

An increase in government borrowing can:

crowd out private investment in physical capital.

Which of the following is least likely to benefit the civilian economy?

R&D aimed at producing new weapons

When a government records a budget surplus, the national savings and investment identity is written as

S+(M-X)+(T-G)=I

If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as

S+(M-X)=I+(G-T)

When a government records a trade surplus, the national savings and investment identity is written as

S=I+(G-T)+(X-M)

_______________________________ can set the stage for international financial investors first to send their funds to a country and cause an appreciation of its exchange rate and then to pull their funds out and cause a depreciation of the exchange rate and a financial crisis as well.

Trade balance

If a government's budget deficits are increasing aggregate demand when the economy is already producing near potential GDP, causing a threat of an inflationary increase in price levels, then the central bank may react with:

a contractionary monetary policy.

If David Ricardo's theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following?

a corresponding change in private saving

When the interest rate in an economy increases, it is likely the result of either:

a decrease in the government's budget surplus or an increase in its budget deficit.

If the government initiates an expansionary monetary policy at the same time that its budget deficit decreases, then the interest rate will ______________________.

decrease

An increase in the government's budget surplus will cause the interest rate to:

decrease.

When the interest rate in an economy decreases, it is most likely as a result of:

an increase in the government budget surplus or a decrease in its budget deficit.

If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger.

an inflationary increase in the price level

When governments are borrowers in financial capital markets, which of the following is least likely to be apossible source of the funds from a macroeconomic point of view?

central bank prints more money

Ricardian equivalence means that:

changes in private savings offset any changes in the government deficit.

If a government experiences an increase in its budget surplus, which of the following possible outcomes will likely result?

private savings decrease while everything else holds constant

The US economy has tow main sources for financial capital _______ and ____________

private savings from US households and firms; inflows of foreign financial investment

Suppose you are analyzing data for an economy in which Ricardian neutrality holds true. If the budget surplus increases by 100, then:

private savings will decrease by 100.

Suppose you are analyzing data for an economy in which Ricardian neutrality holds true. If the budget deficit increases by 50, then:

private savings will increase by 50

An additional investment in human capital, especially for the low-income nations of the world, will likely directly increase which of the following?

productivity and economic growth

If a government decides to finance an investment in ________________ with higher taxes or ____________________ in other areas, it need not worry that it is crowding out private investment.

public physical capital; lower government spending

If an economy has a budget surplus of 1,500, private savings of 3,000, and investment of 5,000, what will the balance of trade in this economy equal?

surplus of 500

If an economy has a budget deficit of 600, private savings of 2,000, and investment of 800. What is the balance of trade in this economy?

surplus of 600

A _____ can lead to disruptive economic patterns and heavy strains on a country's banking and financial system

sustained pattern of large budget deficits

If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then:

the central bank might react with an expansionary monetary policy.

When a business firm makes an investment in physical capital, what is that investment subject to?

the discipline of the market

In most developed countries, the government plays a large role in society's investment in human capital through _________________________.

the education system

A government began 2013 with a budget deficit and a trade deficit. During the year, the government changed its policy and is now running a budget surplus. If all other factors hold constant, this change in policy will cause:

the exchange rate and the trade deficit to decrease.